Lawmakers considering range of fees, taxes

With state facing $1.6 billion deficit, Marylanders likely to feel the pinch

March 26, 2011|By Annie Linskey and Julie Bykowicz, The Baltimore Sun

The increases would start in the cradle, with a boost in the cost of obtaining a birth certificate.

They would hit passengers on a train or a bus, students paying for college, and residents buying a car or a house.

Hospital patients could would see their health insurance premiums go up, homeowners would pay more for energy, drinkers would owe more for that beer.

With two weeks left in the 2011 legislative session, the General Assembly is focused on the state's operating budget. And as lawmakers look for new revenue to close a deficit estimated to be as large as $1.6 billion, they are considering increases to a broad range of fees.

Marylanders are likely to feel the impact in their wallets for years to come.

Collectively, the proposals would raise hundreds of millions of dollars — money that the legislature's majority Democrats say is necessary to keep the state running in the fiscal year that begins July 1.

Republicans say lawmakers should be downsizing government and have warned of fees they say are "hidden" within the advancing budget legislation. The House minority party proposed a spending plan that GOP members said would have cost the state $621 million less than the proposal introduced by Gov. Martin O'Malley. It was rejected by House Democrats.

The House of Delegates voted last week to send a $14.6 billion general operating budget spending plan to the Senate. The Assembly has until April 4 to approve the budget bill.

Because many of the cost increases would be permanent, the revenue would shrink the state's so-called structural deficit into the future. Democrats say the budget approved last week by the House of Delegates would narrow the gap by 46 percent, sending a signal to the Wall Street analysts who help determine a state's fiscal health.

But those increases also mean the state would be establishing a new, more expensive normal. Lightening consumer pocketbooks could be politically risky for O'Malley, a second-term Democrat who has tried to present himself at home and around the country as a fiscal hawk.

The governor kept his carefully worded 2010 campaign promise to avoid new taxes, but it's unclear if Marylanders will let him off the hook for the fees he has proposed, or any tax hikes might accept from the General Assembly.

"If he signs it, he owns it," said Jennifer Duffy, an analyst with the nonpartisan Cook Political Report. Duffy said the political impact would depend on how broadly the fees are felt.

But O'Malley sailed to a decisive victory last fall, seemingly unaffected by a special session in his first year in office that included more than $1 billion in tax increases. It featured a penny-per-dollar increase to the sales tax and elevated income tax rates for high-earning residents and small businesses — moves Republican challenger Robert L. Ehrlich Jr. eagerly pointed out on the campaign trail.

O'Malley spokesman Shaun Adamec said the governor has "a solid record of making decisions for the long-term fiscal health of our state and not based on political winds."

"The costs of doing nothing far outweigh the tough choices that need to be made now to address the challenges we've got with regard to the budget," Adamec said.

Fees have a particular resonance for O'Malley, whose campaign last year labeled Ehrlich "a typical politician" for claiming not to have raised taxes when he was governor.

Ehrlich did raise fees, which inspired the high-rotation advertisement in which an O'Malley supporter declared there was no difference: "If it comes from my pocket, it's a tax."

Months later, Duffy said, O'Malley "is hoping nobody remembers."

Republicans have labored to remind citizens.

"Watch out for a possible tax avalanche," Sen. E.J. Pipkin wrote in a email sent to the media earlier this month, noting "proposed taxes, fee hikes and bills that would burden Maryland's already over-taxed citizens."

"Let me count the ways the Maryland taxpayer could be scalped," the Eastern Shore Republican wrote.

One of the most sizable fee increases would be imposed on Maryland hospitals — and likely passed on to anyone with health insurance.

Democrats are proposing to increase the assessment on the state's 57 hospitals to a total of more than $250 million. The hospitals want to recoup that expense by raising their rates.

But increases in hospital rates require the approval of the state's Health Services Cost Review Commission, an independent panel that doesn't meet until four days after the General Assembly adjourns.

Commission Chairman Frederick W. Puddester said last week he didn't want to "prejudge" the panel's response.

"Historically, the commission has asked the hospitals to share," Puddester said. Last year, the state levied a smaller assessment, and hospitals had to eat 30 percent of it.

The larger assessment could result in increased insurance premiums for Marylanders.

"There is going to be that kind of pressure," said Health and Mental Hygiene secretary Joshua Sharfstein.